There are two ways to look at the recently announced acquisition of Slack by Salesforce. On the positive side, it provides Slack with the resources it needs to potentially better compete against Microsoft. On the negative side, it isn’t a good match for Salesforce, which specializes in tools for groups that currently don’t like to collaborate and that typically are at odds with groups that do. Let’s talk about this good news/bad news acquisition and why it will likely fail expectations.
The Microsoft Threat
As a recent lawsuit filed by Slack against Microsoft suggests, Slack is having trouble competing with Microsoft, which bundles its collaboration product with its dominant productivity solution, Microsoft 365. Like everything Microsoft has added to Microsoft 365 so far, Teams provides a critical update for the increased need to collaborate virtually, particularly during the pandemic. The offering already included communications features, and advancing it to include collaboration was done to maintain competitiveness against its primary competition Google Docs.
There is, as yet, no evidence that Microsoft created this bundle to compete against Slack. And while that is certainly possible, adding a feature to a complex product offering that customers want and that better positions it against its main competition is generally not seen as anti-competitive, so Slack’s likelihood of prevailing in their litigation is low.
Competing against Microsoft isn’t a viable path either because Slack lacks the resources and breadth to go head to head with one of, if not the, most powerful software company in the world. But, merging with another more powerful company like Salesforce should, at least, provide the additional resources that Slack needs to compete in the channel and fund competitive marketing effectively. On paper, the merger does mitigate, but not eliminate, the threat Microsoft represents but not wholly, and I don’t think it does it well either.
Salesforce: The Bad Port in a Nasty Storm
It makes sense to merge a collaboration and a productivity offering like Microsoft 365 because the related efforts are often collaborative by nature. However, salespeople typically don’t like to collaborate because they compete for quotas, commissions, and awards like the President’s Club. So the tools that Salesforce sells aren’t as conducive to collaboration, and the fit between Slack and what Salesforce currently provides feels forced and artificial.
If you want to replace Teams, you either have to integrate with Microsoft 365 better than Teams does or replace Microsoft 365. This issue isn’t a fundamental problem because Salesforce is used to build tools for salespeople, and the people building those tools will undoubtedly want to collaborate. However, developers often develop for multiple platforms and are more likely to be committed to tools from a software company than any software vertical. Microsoft is a tools company, while Salesforce is more of a vertical software company.
Finally, to drive through Microsoft’s massive competitive advantage in terms of resources and Microsoft 365 integration, much of Salesforce will need to pivot to support and drive demand to Slack. Microsoft is still more prominent and more powerful than the combination of Salesforce and Slack, suggesting that, to even defend against Teams’ incursion, Salesforce will have to redeploy much of its existing Salesforce to counter Microsoft’s success in this segment. Doing so will put its premier offerings at risk and Salesforce will likely be unwilling to do that, given those products currently sustain the company.
Slack is outmatched by Microsoft for collaboration, and their antitrust complaint against Microsoft is likely to fail, so merging with another, larger company to increase their resources makes a great deal of sense. But Salesforce’s strengths aren’t in broad development tools or productivity solutions outside of those targeting salespeople, and that means, even when combined, the firm will lack the focus required to fix the problem as well as the synergy that Microsoft currently enjoys.
As a result, I don’t expect this merger to be successful long term, but it should increase Slack’s confidence, potentially reducing competitive migrations but increasing the new customer risk. This result is because the new combined offerings won’t match up well with the blend of collaboration and productivity in Microsoft 365. While arguably better than doing nothing, unless the new combined company comes up with a stronger, broader productivity solution to wrap Slack around, the outcome will be less than positive in the long run.